1. ' The Insurance Company, namely, Indus Assurance Company Limited, has not appeared. Direct service could not be affected, so that an order for substituted service had been made. Publication had been made in a daily newspaper. In short, it is a case of no contest.
2. ' This is a petition by the Controller of Insurance under subsection (50) of section 3 of the Insurance Act read with section 53 of the Insurance Act and section 162 of the Companies Act.
3. ' Indus Assurance Company Limited which, for sake of brevity, is hereafter referred to as the "Company" was incorporated in March, 1965 and registered with the Controller of Insurance under section 3 of the Insurance Act. The Company was permitted to do fire, marine and miscellaneous insurance business. The nominal capital was Rs, 1 crore divided into shares of Rs, 10 each, and the paid-up capital as per Balance Sheet, was shown as Rs, 12,50,000.
4. ' It seems an investigation was conducted in 1976 and 1977 under section 33 of the Insurance Act. By subsection (1) of the said section, the Controller of Insurance, who is the petitioner before me, can order investigation into the affairs of an insurer viz, an Insurance Company. A detailed procedure is provided by section 33 of the Insurance Act, and, in the course of investigation, the Controller has the power to call for all books of account, registers, or documents for the purpose of satisfying himself that the Company is being run on sound commercial lines. Subsection (3) of section 33 provides for powers to the Controller to .Cancel the registration of the Insurance Company under clause (1) of subsection (4) of section 3 of the Insurance Act, and also to apply to the Court for winding up of the Insurance Company. It shall be profitable to reproduce subsection (3) of section 33 of the Insurance Act, which reads as follows : "(3) When an investigation is made under this section, the Controller may, after giving an opportunity to the insurer to make a representation in writing or be heard in person, by order in writing :
(a) require the insurer to take such action in respect of any matter arising out of the investigation as he may ' think fit to secure compliance with the provision of this Act ; or
(b) cancel the registration of the insurer under clause (1) of subsection (3) of section 4 ; or
(c) apply to the Court for the winding up of the insurer, if a Company, whether the registration of the insurer has been cancelled under clause (b) or not."
5. ' In pursuance of this investigation under section 33 of the Insurance Act, some facts were revealed, which are as follows :
(1) That the Company had invested amounts of Rs, 1,50,000 and Rs, 5,85,000 in Industrial Urban Co- operative Bank Limited and Industrial Agricultural Co-operative Bank Limited, respectively, and such investments had yielded no interest,
(ii) the Company had a balance of Rs, 3,80,000 in current account with the Industrial Urban Co- operative Bank Limited,
(iii) that the Company had, in 1969, invested a sum of Rs, 4,20,000 in the shares of Larkana Woollen Mills, and such investment was in violation of section 27-B of the Insurance Act for the reason that the Chairman of this Company was the same person as the Chairman of the Larkana Woollen Mills.
6. ' The said Larkana Woollen Mills is in liquidation, and I have passed an order, confirming the sale of this Mill in J.M. No, 14/1979.
7. ' On the above facts being established, the Controller of Insurance gave directions to the Company to retrieve the amounts invested, as otherwise the registration of the Company would be liable to cancellation under clause (f) of subsection (4) of section 3 of the Insurance Act. Such a direction could, no doubt be made by the Controller of Insurance in exercise of powers under section 34-A of the Insurance Act, the exercise of which powers generally follows investigation under section 33 of the said Act. Such directions can be given if the Controller is satisfied that it is necessary to give such directions in the public interest, so as to prevent the affairs of any Insurance Company being conducted in a manner detrimental to the interest of policy holders, or, of the Company itself, and also for securing the proper management of the Company. It appears that such directions were not complied with. There is nothing on the record to indicate if any reply was also made by the Company. The Controller, thereafter, passed an order under clause ( f ) of subsection (4) of section 3 of the Insurance Act. This clause reads as follows : "(4) The Controller of Insurance shall cancel the registration of an insurer either wholly or in so far as it relates to a particular class of insurance business as the case may be :
(f) if the insurer makes default in complying with, or acts in contravention of any requirement of this Act or any rule or order made thereunder ; and"
8. ' In fact, a further ground has also been urged in this petition, which is based on the requirements of section 3-B of the Insurance Act. Under such provision, all Insurance Companies have to enter into treaties with other Companies, or, investors for better performance of their Company and to provide a fuller cover. This may be in the nature of subrogation contracts. The Controller of Insurance, by a letter, dated 3Ist May, 1977 pointed out to the Company that the six treaties, which the Company had entered, stood terminated, because of default committed by the Company. A show-cause notice was given (Annexure `B'), but it seems no reply was made by the Company. An order was then passed by the Controller of Insurance on 3rd September, 1977 after recording satisfaction that the provisions of section 3-B of the Insurance Act have been contravened, and, as a consequence, the Controller of Insurance cancelled the registration of the Company in exercise of the powers under clause (f) of subsection (4) of section 3 of the Insurance Act. In the last paragraph of the order, due care was taken in regard to the rights and interest of policy holder by stating as follows : "The attention of the Indus Assurance Company Limited is invited to subsection (5-B) of section 3 of the Act, 1938 whereby, with effect from 15th October, 1977, the Indus Assurance Company Limited shall not enter into any new contract of insurance but all rights and liabilities in respect of contracts of insurance entered into by the Indus Assurance Company Limited before 15th October, 1977 shall continue as if the cancellation has not taken place."
9. ' It is under these circumstances that this application has been made, seeking an order of winding up of the said Company on the ground that the registration of the Company had not been revived, that the Company was insolvent, that the continuance of Company is prejudicial to the interest of policy holders, and that the Company is unable to pay its debts.
10. ' There has been no contest, so that the facts, as are stated in the application and the several letters of the Controller of Insurance, have gone unchallenged. The Company has not put in any appearance.
11. There is abundant material on the record to show that the liabilities of the Company exceed the total paid-up capital of Rs, 12,50,000. The reckless manner in which investments have been made by the Company with co-operative societies and banks, without any return, is a further pointer in the direction that the funds of the Company have not been utilised in a proper manner. The Company not having provided for re-insurance in the nature of subrogation would go to show that the Company has exhibited scant care about the rights and protections of its policy holders. A huge amount was invested in Larkana Woollen Mills, and such woollen mills have also been ordered to be wound up and, in fact, their assets have been sold, as stated above. In these circumstances, the Controller acted in a very correct manner by passing an order of winding up.
12. ' The next point, that deserves consideration, is the mode to be adopted by this Court in passing orders of winding up in regard to Insurance Companies. Section 53 of the Insurance Act deals with the point of winding up of an Insurance Company by the Court. Subsection (1) of section 53 reads as follows : "(1) The Court may order the winding up in accordance with the Companies Act, 1913, of any insurance company and the provisions of that Act shall, subject to the provisions of this Act apply accordingly."
13. On a reading of this provision, it would appear that the norms and principles, governing the winding up of an insurance company, are provided in the Insurance Act itself, but the modalities of winding up shall be in accordance with the Companies Act of 1913. In fact, the provisions of the Companies Act, in as far as those are not in conflict with the Insurance Act, will govern the mode of winding up. In fact, the Companies Act, in section 162 onwards, provides a full code in respect of winding up process, and such provisions have to be followed even in those cases, where Insurance Companies are sought to be wound up.
14. ' Looking to the nature of this case and the uncontroverted findings of fact recorded by the Controller of Insurance, which are affirmed by this Court, this company is directed to be wound up under section 53 of the Insurance Act read with section 162 of the Companies Act. I appoint the Official Assignee as the Official Liquidator with all the powers. He shall forthwith take over the assets of the Company. The Company shall cease to do any business hereafter.
15. Company directed to be wound up. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.